Australia's current financial services regulatory & compliance landscape is changing rapidly - Clyde & Co's weekly Regulatory Roundup will ensure you are up to date with the most important changes. In each edition, we will set out key developments from the past week for you to consider.
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1. ASIC brings charges for ‘pump and dump’ conspiracy: Four people have been criminally charged for their alleged involvement in a coordinated scheme to pump up shares in Australian stock values before dumping them at inflated prices. ASIC alleges that the defendants formed a private group on the Telegram app where they discussed and selected penny stocks to announce to the public Telegram group named the ‘ASX Pump and Dump Group.’ Facing a maximum penalty of 15 years’ imprisonment and a fine of over $1 million for market manipulation, they are charged with dealing with the proceeds of crime in relation to the money that they each obtained from selling the shares subject of the pump and dump activity (being a type of fraud), and conspiracy to commit market rigging and false trading.
2. ASIC report on cleanliness of equity markets: ASIC’s latest market cleanliness report, Equity market cleanliness snapshot report 786 July 2024, has stated Australia’s equity markets continue to operate with a high level of integrity and remain consistently among the cleanest in the world. The report found that in the five-year period up to 30 April 2024, there were two periods of temporary deterioration in market cleanliness. The first was during the COVID-19 pandemic when global markets experienced high market volatility and trading, and the second was in late 2023 as corporate activity increased. To protect market integrity, address deteriorations and identify potential misconduct, ASIC uses real-time trade surveillance data, analytical tools, and human expertise. ASIC has said it is also establishing a dedicated criminal investigation team to better progress insider trading investigations and increase the number of criminal briefs it refers to the CDPP.
3. APRA takes action against OnePath Custodians Pty Limited (OPC) for superannuation member issues: APRA has agreed to accept a court enforceable undertaking from OPC pledging to rectify compliance deficiencies and compensate members. OPC has also paid $10,704,600 under infringement notices issued by APRA for alleged breaches of the Superannuation Industry (Supervision) Act 1993 (Cth) for failing to invest members’ default superannuation contributions in MySuper products. OPC previously paid $1.5 million in June 2023 for similar conduct, and APRA has said it remains concerned that OPC’s failures to adequately implement the MySuper provisions imply various ongoing cultural and governance failures within the organisation. OPC has acknowledged APRA’s concerns in the court enforceable undertaking and has committed to (1) identify, rectify and remediate all members adversely affected by the breaches with input from an independent expert, (2) allocate additional resources to replenish the Operational Risk Financial Requirement to 100% of the target balance of 0.25% of funds under management, and (3) hold $40m of its existing Operational Risk Financial Requirement assets as an overlay until OPC has satisfied the terms of the undertaking. This action is an ongoing reminder of APRA's focus on governance and risk matters.
4. APRA completes program to modernise the prudential architecture: APRA has published the final version of its new digital Prudential Handbook, signalling the delivery of its multi-year project to modernise the prudential architecture (MPA). In 2021, APRA launched the MPA, with the goal of making APRA’s regulatory framework for banks, insurers and superannuation trustees clearer to understand, simpler to navigate, and more adaptable to ongoing changes in the operating environment. The MPA program has since delivered changes to the design and presentation of APRA’s prudential framework to enable (1) better regulation, (2) a ‘digital first’ approach, and (3) new risks, new rules. These updates aim to improve the design of the prudential framework, rationalise and consolidate standards and guidance, use technology to make it easier to access and manage the standards, guidance and policy information, and respond in an adaptable and agile way to emerging risks in a manner.
International perspective: CB Payments Limited (CBPL), which is part of Coinbase Group, has been fined £3.5M by the UK FCA for repeatedly breaching a requirement that prevented the firm from offering services to high-risk customers. CBPL does not undertake cryptoasset transactions for customers but it acts as a gateway for customers to trade cryptoassets via other entities within the Coinbase Group. CBPL is not currently registered to undertake cryptoasset activities in the UK, though after engagement with the FCA, CBPL agreed to refrain from taking on new high-risk customers while it addressed issues with its framework. Despite the restrictions in place, CBPL onboarded and/or provided e-money services to 13,416 high-risk customers.
“We will continue to invest in data and technology to hunt and detect all forms of market misconduct. As our financial landscape evolves we will expand our market cleanliness work to capture private markets and products in the coming year.” (ASIC Chair Joe Longo)
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